Du owner EITC first-quarter net profit soars on fixed line gains

Osman Sultan, CEO of Emirates Integrated Telecommunications Company says EITC had an excellent start to the year in the first quarter. Sarah Dea / The National

Emirates Integrated Telecommunications Company (EITC), the parent company of the UAE’s second-largest telecoms operator Du, posted a 41 per cent rise in the first quarter net profit on the back of rising revenues and tighter cost controls as well as a one off gain.

The Dubai-based company said net income for the three months to March end rose to Dh518.5 million, compared with Dh368.2m a year earlier, beating analyst expectations. The mean forecast from three analysts polled by Bloomberg was Dh443.3m.

“EITC had an excellent start to the year, with the new strategy delivering growth in revenue, subscribers and net profit,” said Osman Sultan, EITC’s chief executive.

“Growth has come from continued growth in our fixed line and other revenues. A positive for the quarter, the average revenue per user has also stabilised compared to the declining trends seen last year.”

The operator’s revenues rose 5 per cent to Dh3.33 billion in the first three months of the year compared to Dh3.17bn in the same period last year, bolstered by gains in fixed line revenue, which increased 6.3 per cent to Dh561m. Mobile revenue increased 0.4 per cent to Dh1.801bn in the first quarter versus Dh1.793bn in the corresponding period last year, the company said in a statement posted on the Dubai Financial Market, where its shares are traded.

Shares of Du rose 0.4 per cent to Dh4.91 at the close of trade.

The company said it registered a gain of Dh67m in the first quarter of 2018 for telecommunication licences and related fees. Sanyalak Manibhandu, head of research at FAB Securities, said the one-off was a reversal of regulatory costs. It wasn’t immediately clear to Mr Manibhandu why there was a gain in fixed line revenue and he said he was waiting to hear from the company on the matter.

The company said mobile subscribers rose 1.3 per cent in the first quarter to 9.3 million while fixed line subscribers increased 6.5 per cent to 753,000. Mr Sultan said that subscribers were staying longer with the company and spending more money.

“The important thing is that when we acquire customers, we make sure that we acquire customers that are going to be with us for a long period,” Mr Osman told reporters on a conference call after the results were released. “Not someone who is going to be with us just to take a line with benefits before moving on to another line.”

Much of the operator’s traditional mobile revenues come from prepaid customers who typically generate a lower average revenue per user than customers with monthly post-paid subscriptions. Mr Sultan said however that despite pressure on revenue from voice calls due to the use of internet-based applications, there was a massive demand for data usage.

“We remain cognisant of industry-wide challenges, with continued pressure on voice revenues and challenges in monetising data,” Mr Sultan said. “In 2017 we embarked on a transformation journey designed to respond to these new market realities, with a new strategy, as well as the launch of our fully digital brand Virgin Mobile."

Mr Sultan forecast growth of 0 per cent to 2 per cent earnings before interest, taxes and depreciation and amortization in 2018.